The Commerce Secretary, Dr Rahul Khullar, said on Monday that India's exports to the US will start slowing down almost immediately, mostly from August.
The Commerce Secretary's statement comes in the backdrop of the credit rating agency Standard & Poor's downgrading of US sovereign debt.
However, Dr Khullar said that such a slowdown in India's exports to the US was expected more than six months ago due to a fall in the aggregate demand there. He added that there was no need for panic because of S&P's downgrade.
Since consumers in the US are likely to switch over to cheaper products, those exporters adapting quickly to cater to such demand will survive, Dr Khullar said.
Export sectors such as garments, gems and jewellery will be hit with consumers in the US wary of spending due to their concerns over job losses. The festival (Christmas and New Year) orders may not be as expected. Shipments to Europe will also record a fall due to the debt crisis in the region.
Incidentally, the Commerce Ministry is working on sops for exporters as part of the Foreign Trade Policy supplement, which is expected to be announced soon. Asked about them, Dr Khullar said, “Something is being worked out” and declined to elaborate.
If investment falls in India due to the sentiment effect and the precautionary behaviour of people, it will in turn result in a fall in imports too, Dr Khullar said.
People are likely to invest more in commodities such as gold and silver as they are seen as safe assets. Though oil prices are likely to fall temporarily due to the decline in demand, they may increase towards the end of the year as they do every winter.